Informing and connecting businesses in New Jersey

Unlikely allies show UEZs deserve a chance

By ROI-NJ Editorial BoardNew Jersey|
Apr 17, 2018 at 7:20 am

Editorial

Maybe everything that dies someday comes back.

We try to keep the Bruce Springsteen quotes to a minimum here at ROI-NJ. But sometimes you just can’t resist — and we’re pretty sure Bruce would support our position on the state’s Urban Enterprise Zones.

Five UEZs have already expired, leaving 32 that will die between 2019 and 2026, under existing sunset provisions. But proposed legislation would give each existing UEZ — an economic-development zone where businesses can charge half the state’s sales tax — an additional 10 years of life. The bill, A3549, would also reinstate the Bridgeton, Camden, Newark, Plainfield and Trenton zones, which former Gov. Chris Christie allowed to expire at the start of 2017.

The legislation is endorsed by the New Jersey Business & Industry Association — and Gov. Phil Murphy. And the fact that the NJBIA and the progressive governor agree on UEZs is a good indication that the program, while perhaps not ideal, is worth keeping, at least until a better alternative is developed.

The UEZ program, under which businesses in qualifying economically-distressed cities can offer the sales-tax discount and receive other incentives to grow their bottom lines and create jobs, was created in 1983 and was never intended to be permanent. The zones were scheduled to sunset 20 years after being established. But in 2001, the Legislature gave each UEZ another 16 years of life. That time ran out for the five original UEZs. Now, if the Legislature doesn’t act, the Millville and Vineland zones will die in 2019, with the rest to follow in subsequent years.

Approximately 6,800 businesses are in the program, according to the New Jersey State League of Municipalities, which also supports the pending legislation. It is true that — as Assemblyman Anthony M. Bucco (R-Randolph) has pointed out — the state’s UEZs have not exactly revitalized the cities where they exist. Most of these urban centers are still struggling. But, as the NJBIA notes, small businesses in these zones still need the help provided by the program. And considering that Murphy has pledged to put more of an economic-development focus on small businesses, allowing this program to fully expire seems counterproductive.

The problem is that the program does not come without a cost. One study estimated that the sales-tax break in the UEZs cost the state $2.17 billion between 2002 and 2008. The Office of Legislative Services estimates that A3549 will cause the state to lose approximately $19.6 million in tax revenue in 2019, $43.3 million in 2020 and $51.2 million in 2021.

But some of that “loss” is money that flows back to the municipalities to benefit the enterprise zones — $6.1 million in 2019, $13.4 million in 2020 and $15.9 million in 2021, according to the OLS. So, the UEZ program is not quite as costly as critics claim. It’s a decidedly mixed bag.

By all means, the program should be further studied, as the pending legislation will also require. But, in the meantime, let’s not pull the rug out of these struggling towns quite yet.